Introduction

To increase efficiency and reduce costs of a business, it is critical to get the supply chain operations streamlined. In recent years, 4PL logistics has been gaining popularity to help make supply chains easier for businesses.
In this post we will be understanding what 4PL logistics is and how it is different from traditional logistics and its benefits.

What is Fourth Party Logistics (4PL)

Fourth Party logistics or 4PL logistics is an outsourced supply chain management solution. This involves hiring a company to manage all your logistical operations which includes functions like transportation, warehousing, order fulfillment and inventory management. 4PL logistics acts as a single point of contact between the businesses and other aspects of logistics such as carriers and warehouses.
In short, a 4PL logistics provider manages and optimizes the complete supply chain, from planning to execution, for the business. They look after the performance of all logistics partners ensuring that the supply chain operations run smoothly.

How are 4PL Services Different from Traditional Logistics?

When we talk about traditional logistics it involves individual aspects of the business’s supply chain which includes transportation, warehousing and order fulfillment. All of these functions are typically managed by different companies, with the company itself acting as the link between them.
On the contrary, 4PL logistics involves outsourcing the entire supply chain management process to a single service provider. The 4PL logistics provider is a strategic partner, which helps them optimize their supply chain operations and improve it.

Core differences between 4PL and 3PL

A 3PL logistics provider only handles a section of your business’ logistics but a 4PL logistics acts as the only point of contact when it comes to supply chain management of the particular company. Therefore, a large 3PL may turn into a 4PL by using the infrastructure they have built by managing functions for different businesses.
4PLs may offer considerable supply chain management efficiencies because of their wider reach, deeper network, and in-depth understanding of supply chain solutions. With the supply chain streamlined, you’ll have more time to focus on your business. Neither the 3PL nor the 4PL logistics model is intrinsically superior to the other; rather, your business may experience greater success with one model than the other.

 

Number	Basis	4PL	3PL
1.	Outsourcing	Maximum outsourcing	Limited outsourcing
2.	Best for	Big businesses and middle-sized companies	Small scale organizations to medium enterprises
3.	Administration	Governs 3PLs	Governs logistical functions
4.	Accountability	Solely responsible for the whole supply chain, including any subcontracted 3PLs.	Emphasis on Order Processing; Internal Logistical Tasks Must Be Handled Independently
5.	Decisions	Complete supply chain decision making	Allows for real logistical flow to be facilitated depending on decision-making at the top.
6.	Point of Contact	The client’s only point of contact	Uneven exchange of information
7.	Scalability	Scalable contracts	Restricted by long term contracts
8.	Technology	Systematically monitor every aspect of your business’s supply chain operations from anywhere via the cloud.	Goal is to use technology to make shipping more efficient.
9.	Support	Enhanced All-Inclusive Assistance	Essential assistance

 

Benefits of 4PL

4PL in supply chain management has a lot of advantages. Let’s look at 5 benefits of 4PL

1. Comprehensive accountability

All the various aspects of supply chain management including functions like storage, shipping, freight coordination and IT, are taken care of by the fourth party logistics, delivering complete solutions.

2. Personalized and tailored solutions

There might be instances where when a company uses 3PL solutions they might push products which aren’t greatest for the business. On the contrary, working with a 4PL service provider gives them an advantage as they are completely focused on a solution-oriented approach, giving you customized solutions.

3. Carrier management

It can be very difficult for a business to manage several suppliers at the same time. In response to this, 4PL supply chain companies help manage the company’s entire network of suppliers and logistical processes.

4. Conserve resources

Throughout the vendor assessment and onboarding phases, the 4PL service provider is accountable for ensuring the smooth operation of the business by implementing the required systems, processes, and KPIs. This allows businesses to focus on their strengths by freeing up resources.

5. Improved visibility

When it comes to 4PL logistics providers, they use advanced technology platforms that provide real-time visibility into supply chain operations. This helps in increasing visibility allowing businesses to track shipments, monitor inventory levels and identify potential issues. As a result, businesses can make data-driven decisions to improve their supply chain operations.

Wrapping Up

4PL logistics can help businesses increase productivity, minimize expenses, and help increase profits, creating an overall strategic supply chain. Businesses can reap the benefits of heightened visibility, scalability, and less risk by outsourcing their logistics operations to a 4PL provider.
4PL logistics can be the solution you need if you want to increase the efficiency of your supply chain processes and boost overall business performance.

FAQs 

Who invented 4PL?

Bob Evans of Arthur Anderson (now Accenture) first used the words lead logistics provider (LLP) and fourth-party logistics (4PLs) in 1996.

What is 3PL 4PL and 5PL?

What separates 3PL, 4PL, and 5PL from one another is how integrated and involved they are in the supply chain of their clients. A 3PL’s sole purpose is to carry out the shipper’s orders. A 4PL is responsible for order fulfilment, improvement, and discovery. A 5PL is then available to manage every facet of the supply chain.

How does 4PL work?

A corporate operating model known as fourth-party logistics, or 4PL, involves totally outsourcing supply chain management and logistics to a single outside service provider.